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Pomerance: Forecasting and decision- making

By Steve Pomerance

Posted:
11/11/2012 01:00:00 AM MST

Some years ago I read Robert Rubin's book, "In An Uncertain World." Rubin focused on the process of decision-making when the results of that decision are anything but guaranteed. Many times we have to make choices based on very uncertain forecasts; the key is to do the analysis in the proper context, to give it the appropriate "frame."

Last Thursday evening, the Boulder City Council was discussing the planning process for the Civic Center area that runs along Boulder Creek in downtown. The council is faced with some real issues here -- many of the city's buildings are already in the flood prone area, and climate change will almost certainly increase the frequency and severity of flood events. But how much more is not predictable with any level of certainty, at least not yet. So what is the council to do?

The council needs to take the perspective of looking back from 25 or 50 years in the future. Just as some are already asking about past decisions, we do not want our successors to ask why we didn't consider more seriously the potential impacts of climate changes before we allowed or promoted building in an area of such high flood risk. Although the science may not be perfect, we can still ask "what if" questions: For example, what if the storms double in intensity and frequency? What if what are now very severe "500-year" storms (probability of 1/500 in a given year) occur much more frequently, like with 1/100 probability?

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The decisions to build our current civic offices and other buildings in this area were made many decades ago. We now have the benefit of far better analytic tools and can create very accurate scenarios of what the future might bring. So let's do our planning based on what we can reasonably expect from climate change, so that those who are around in the future won't regret our decisions.

One other point -- a few decades ago, when a lot of the flood regulations were being put into place, the city made the decision to not "channelize" our flood-prone creeks, and to leave them in their natural state insofar as possible. It would be unfortunate to have to reverse that decision in order to protect investments we make now without considering the effects of climate change. So it's good news is that the city is now shifting toward making flood issues and the structural adequacy of city buildings the critical piece in the Civic Center planning process.

The council also discussed an example where forecasting went awry -- the financial and attendance picture for the Pro Cycling Challenge race that took place in August. According to the City Council agenda item in June prior to the race, the expected direct sales tax benefit ranged from a low of $117,000 to a high of $470,000. But the actual result was only about $48,000 (as determined by a CU survey), a fraction of the minimum forecasted, and nowhere near the city's direct costs of around $283,000. The attendance on Flagstaff, which was expected to be 30,000 or more, was actually only about 8-10,000, again a fraction of what was forecasted. A critical evaluation of the forecasting models seems to be needed.

The good news about the race was that it came off pretty much without a hitch, and there was no fire and no lightning storm to disrupt the final leg up Flagstaff. So city workers and the race organizers deserve plaudits. But the council needs to acknowledge, which they couldn't seem to bring themselves to do last Thursday, that both attendance and financial returns were very far below expectations.

There needs to be a context shift about the opportunity cost of spending almost a quarter of a million dollars net on some professional entertainment, which for most spectators only lasted a few minutes, when other events are asked to pay their own way (the Bolder Boulder) or raise money for charity (the Bailey Hundo race.) There are alternative ways to spend the citizens' money and staff's time that have no Charter issues and more value. Just because something is scarce is not a reason to do whatever it takes to get it -- that's department store "sale" mentality, not a way to make decisions in the public sector.

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